San Jose Weekly Mortgage Market Commentary 07/26/2009

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The week that was

Mortgage Loan Limits Extended: The House Appropriations Committee has approved an extension of the $729,750 loan limits for Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA) through September 2010. The committee also increased the lending and guarantee authority of FHA and Ginnie Mae, as requested by the Obama Administration.

The Department of Housing and Urban Development appropriations bill authorizes FHA to insure $400B in single-family loans during fiscal year 2010, up from $315B in the current 2009 fiscal year, which ends Sept. 30.

Mortgage Rates mostly unchanged: Early last week (Monday, Tuesday) mortgage rates fell, pushed up by the decline in yield on the 10 yr note. By Wednesday it was over, mortgages closed a little lower (price); on Thursday prices fell hard, Friday ended about unchanged. The bottom line; on the week there was almost no change in interest rates.

Freddie Mac weekly average for 30-year fixed-rate mortgage (FRM) averaged 5.20 percent with an average 0.7 point for the week ending July 23, 2009, up from last week when it averaged 5.14 percent. Last year at this time, the 30-year FRM averaged 6.63 percent.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 4.74 percent this week, with an average 0.7 point, down from last week when it averaged 4.83 percent. A year ago, the 5-year ARM averaged 5.49 percent.

Note that these rates are for loan amounts $417,000 or lower.

The week that will be

Expect more market volatility. The most impacting for mortgage rate markets this week is supply; Treasury will auction (borrow) $115B in notes with auctions everyday but Friday. Economic releases last week were few, this week the calendar has June new home sales, consumer confidence index, June durable goods orders, and the first look at Q2 GDP on Friday. GDP is reported three times; the advance report (tomorrow) a month later the preliminary report, and a month after that the final report. With Treasury supply pushing against bond and mortgage prices, if the preponderance of economic releases continues to fuel the stock market, interest rates will increase.

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